Manufacturing Output Fall Dents UK Growth Hope

The UK's manufacturing output and industrial production declined by more than expected in December - placing further pressure on consumer spending to maintain economic growth.

The Office for National Statistics (ONS) said industrial production fell 1.1% in December on the previous month - culminating in its worst quarterly performance in almost three years.

The decline was led by a 5.4% drop in electricity and gas production, which was affected by warmer-than-usual winter weather.

Manufacturing output decreased by 1.7% in December on a year earlier, the ONS said - a day after the release of the UK's latest trade figures which pointed to the biggest gap in the annual trade deficit last year since 2010.

The downbeat figures put some downward pressure on the initial 0.5% estimate for UK economic growth in the final quarter of 2015.

The ONS said, however, that it was shy of 0.1%.

Its next estimate is due to be released later this month - at a time when the world economy slows and turmoil has gripped world markets knocking confidence further.

Howard Archer, chief UK and European economist at IHS Global Insight, said the figures were "pretty nasty".

He added: "December’s sharp drop in industrial production will fuel concerns about the UK economic outlook as well as the unbalanced nature of growth.

"Manufacturers will be concerned by that the current increasingly fraught looking global economic outlook will weigh down on export orders.

"Manufacturers will also likely be worried that demand for capital goods will be constrained by uncertainty over the global economic outlook and also over the UK referendum on EU membership causing companies becoming more cautious in their investment plans.

"Nevertheless, manufacturers do have some positives to cling on to – notably sterling’s recent softening and very low oil and commodity prices (Other OTC: UBGXF - news) ."